country with teachers taking over state capitals, i think we should understand let's start involving teachers with what we want to do to improve education. announcer: you can hear more about the state of education, the future of work, and how congress should proceed in the wake of the mueller report today at 6:35 eastern online, or listen on our free radio app. next, panera bread founder and former ceo ron shaich talks about the business model of the company, executive compensation, and the responsibilities of business executives to their employees and the community. he spoke at the national press club.

>> good afternoon, everyone and welcome to the national press club, the place where news happens. i am alison fitzgerald kojak, the health policy correspondent at npr news, and the 112th president of the national press club. we are pleased to welcome today's headline speaker, the founder and former ceo of panera bread. but before we begin, i would like to ask you all to take a moment to silence your cell phones. if you think you have done it, just double check so that you don't interrupt our program. if you are on twitter, we encourage you to tweet @pressclubdc and you can use the hastag, #npclive. for our online audience, in addition to club members and working journalists, we have members of the public in the audience. so if you hear any applause or reactions, they are not necessarily coming from the working press. my guess is many of you have eaten at one of ron shaich's restaurants over the years or at least a place inspired.

-- inspired by his approach to dining. he is the founder of both panera bread and au bon pain and is known in the industry as one of the founders of fast-casual, a $40 billion segment of the restaurant industry. panera bread has over 40,000 bakery cafes, six of which are within one mile of here, has 140,000 employees that generate more than $5 billion in annual sales. it was back in 1999 that shaich took his company public. stocks did quite well, but he grew to regret the decision. in 2017, he famously backtracked and took the company private again. then, he stepped down as ceo. since then, he says the decision was rooted in his desire to protect the company and employees from falling prey to the shares of shareholders chasing short-term profits.

since then, he has also taken up the cause of warning others about the current business environment, and how it does not inspire the process of building companies for the long-term, and entrepreneurship. he is the leader of act 3 holdings investment firm that offers support to entrepreneurs. in his spare time, he is the founder of an organization many of us are familiar with, dedicated to promoting bipartisan political problem-solving. i'm sure we will have a lot to talk about today. so please generally in welcoming ron shaich to the national press club. [applause] ron: i know that you all want to talk about your bacon turkey bravo or something equivalent, but i actually would like to

speak about the pervasive short-termism we see in our capital markets, and more importantly, how it is causing real damage to our national interests and what we are trying to do. let me tell you a bit about myself. i have been ceo of a public company for 26 years. to put it in perspective, that is longer than cal ripken played baseball. and unlike cal ripken, i still have knees. so i have some perspective on it. let me tell you a bit about panera, the company i ran for 26 years. it is indeed one of the 10 largest restaurant chains today in america. it is just pushing $6 billion in sales, 140,000 team members, you might call them employees, andn today, serves more than 3 million americans, or as i like to say, 3% of america every

week. i want to bring a bit of perspective. panera has been the best performing restaurant stock in the food industry when measured over the last two decades. it has performed twice as well as starbucks over the last two decades, six times as well as chipotle over the last two decades, and in fact, it beat the s&p 500 by 44-fold. 44 times the s&p 500. you should have invested in panera over the last twenty years. our annualized returns actually beat warren buffett and berkshire hathaway's returns over the past two decades. that is pretty good. [applause] ron: thank you. having said that, i think it is important to share with you why we won. our core strength has been

discovering what will matter tomorrow today, and transforming the company into the future. that is the key. that is what we want from leaders and from our business institution, and that is what we need. that has been the key to our success. our ability to executive these transformations. i call these transformations smart bets, every five years, to prepare for the future. this company was formed as a single store in boston in the 1980's. the first major transformation for us was to realize that the product we were selling, croissant bread, was not what people wanted. if we listened to our customers, they wanted us to use the croissant bread to make a sandwich. and we quickly moved into the sandwich business. au bon pain took off.

it became special and it became the essence of panera. that was the first transformation. the second occurred in the mid-90s. we had bought a company called the st. louis bread company. i came to understand that there was a powerful trend taking form in the consumer marketplace. again, we were trying to figure out what are the deeper trends, how do we separate the wheat from the chaff, what is the noise, what is real? it was clear that people wanted to feel special where everything was mass-produced. by the 1990's, everything was mass-produced, and you started to see a reaction to it. in the beer business, budweiser and miller started to yield to sam adams. in the coffee business, maxwell house started to yield to starbucks.

20 years ago, if you came up to our house on a friday night, we would open a can of folgers. today, if we don't grind our own these and we don't use those expensive machines, we are insulting our guests. isn't that true? it's our perception. you can think about the beverage business and the transformation. 20 years ago or 30 years ago, who would have coke and pepsi. but increasingly, people wanted to feel special, and have something that was uniquely their own. it started the evolution of what we call specialty beverages. we realized the same thing in food service. we saw a large niche of customers rejecting fast food. they simply wanted more than a lot of food for not very much money. that was commercial, that was processed. what folks wanted was real food, they wanted environments which engage them and they wanted to be served by people who actually cared. that had a connection to the food. it was clear to us that it was this niche that was rejecting fast food.

they wanted a food experience that respected them, or at least they felt better about themselves in that relationship. we built panera around the kind of paradigm. that paradigm became the ideology that would have this thing they are now calling fast-casual, which is simply to say, better food, better environment, better people, and a better experience. it is now a $50 billion segment of the restaurant industry. i was saying at lunch, when we first did that, you could have bought our stock for a penny on the dollar for what it ultimately traded, one cent on the dollar. people say to me all the time, ron, why didn't you tell me? and i go, friend, you could have bought that stock by the wheelbarrow for a year. you didn't, because you didn't believe in it. you didn't understand it. that is the reality of

innovation and transformation, it is a willingness to make those commitments ahead of certainty. the third major transformation for us occurred in 1999. i was at that time operating a public company with four divisions -- abp, abp international, a manufacturing business, and the fourth called panera. i was struggling with it. i realized that for now or potential to be international dominant. very few companies ever get there. it is so difficult. i was away with a friend and i was saying, i am really concerned. this is a golden goose. it has the potential to be powerful. my friend looked at me and said, what would you do if panera on -- owned all those other divisions, if the name of the company was panera. i said, if i had any guts, i would monetize all the other assets, use those resources to

make panera happen and i would take the best people and go down there myself and make it happen. i am the kind of person that when i start to think about something, i want to do it. i sat with it for about three months and i decided i would do it. ultimately, we sold every other business we had and bet the whole thing on panera. today it sounds very wise, but when you are going through it, it is horrible. au bon pain was my first son. these are people who i cared about, who i loved. going through that process is always difficult, but that is what change is about. at any rate, it worked. we had a great run through the 2000s. by 2011, we were facing the fourth major transformation. it was clear that panera, the

world was changing, and panera needed to change. ultimately, i went off and i came back and i wrote a memo over the weekend, how would i compete with panera if i was in -- was not a part of panera? i started to think about it and i said, we have to do this. ultimately, we built the vision over the next two years for how to evolve panera. that vision was essentially rooted in digital access, in innovation inclusive of a commitment to clean food, free of all artificial colors preservatives or sweeteners, and ultimately something that is called, omnichannel, which is to say, you can access a panera on digital, on cafe, for delivery, wherever you want, it will be there. we put that vision in place. it was the toughest thing i have

ever been involved in in my career. it was seven or eight different initiatives. by 2017, each of the things we had bet on had become the themes of the restaurant industry. everyone wanted to be digital, wanted to do loyalty, wanted to do omnichannel. panera is 35% digital today, over $2 billion, the largest loyalty program, over 50% of our sales, it is considered a poster child for omnichannel. by 2017, our sales in the restaurant industry were up like 6% in an industry that was flat. very strong performance. and we had record results. best year of our history. so that is the panera story. i want to talk about my perspectives from the other side, as a successful company ceo.

i had a vantage point to watch and serve and i want to share what i have seen. our public markets have become increasingly shortsighted and indeed, hostile to companies like panera that compete on the basis of long-term transformation. that is the truth. the question is why. the reality is investors today in the public markets, your money, they are increasingly renting stock, not shares in a company. what does that mean? 50 years ago, the researchers the average holding time for a stock was eight years. today, the average is less than eight months, a tenfold change in the holding time for public companies. there is a reason for it, you have hedge funds trading on an assessment of the next data point. when i would talk to hedge funds, they would ask, what are

my comps to be, my sales next week? they were treated with so much liquidity that they had the ability to trade and were trading on information change. you can look at active money managers. they are focused on short-term performance also because their incentive is on that short-term performance. why should we buy the stock into that transformation until the event arises? couple that with the increased issues of high-frequency algorithm-based trading, this is a huge part of the market. some would suggest as much as 40%. it is trading not based on evaluation of a company but really arbitraging the marketplace.

it magnifies all that short-term pressure in a very intense way. it is some of the reasons we have seen these flash trading meltdowns that have occurred at different points. you have the passive index funds, which are pushing 20% of all the public market trading. these are institutions that don't manage governance. there are not involved in the governance of companies and they are outsourcing it to other groups which are essentially rules-based. so there is no judgment in it. that is the reality we have. the byproduct of all this is activism. what is activism? it is essentially folks with a short-term focus and financial engineering playbooks who feel the power and the ability to move a company, and you have a dislocation and disconnection between the principal, that is to say your money, and the agents, the folks who are running these companies. the reality is that we have increasingly is the ascent of these activists. and activism campaigns have grown the rate of 18% annually, the number of them, since 2012. think about that. think of what it is.

in my industry, approximately 20% of companies were hit with activism last year. what does it mean? they are really attempting to affect a short-term change in the company. some call it agency theory, it came out of the harvard business school in the 1980's and 1990's, it essentially argues that the only role of management, the only role, is to serve the shareholders who are supposedly owners and to deliver for them in the short-term sense, to maximize their returns. that was not always the way it was. the ideology in corporate america when i got out of business school 40 years ago was that we had a responsibility to the community, to the team members, to our consumer. but today, that has been whittled down to where we are not focused on it, and that is

what has given voice to this activism. let me share with you how activism works. you buy 2% of the company, take another 6% or 8% in derivatives or options, you walk in and you say, listen, i know control 8% of the company, you work for me. i want you to cut this by 20%, i want you to close that factory in milwaukee, i want you to dividend out the money, maybe sell off a lot of assets, and then we will dividend it out and we will let someone else worry about this in about two years. somebody else can deal with it. that is what activism is at the very core level. it doesn't take a lot of brilliance to come in and say, cut. it doesn't take a lot of brilliance to say, let's add more debt, let's add more leverage. the reality is that management in many instances find the cost of fighting them is high and the probability of winning is low.

because, why not push, you can drive up the returns? the probability of winning is low. it is a kabuki dance of incremental acceptance and it goes on over and over again. basically, these activists are taking many of these companies hostage for their short-term interest. i'm not telling you all management teams are good. there are bad companies that are foolishly run, but i don't think as many companies that have been attacked, and so many of them have been attacked over and over, 20% of our industry i don't believe with all due respect, a 35-year-old sitting in an office tower in manhattan is better able to run that company than the folks you have hired to run it for you. that is the reality of it. i want to talk a little about something you probably don't expect, feelings. how does this affect our board rooms and our ceos?

when you have this prevalence of short-termism, this advent of activism, you end up with fear hanging over the decision-making process in so many public companies. the boards seek to avoid being the target of activists and the reality is if you have a candid conversation with any public company, director or lawyers or advisors, you will hear about the looming threat of activism and the effort to avoid it. nobody wants to get caught in these crosshairs. you hear fear, and what boards try to do is they try to outmaneuver the activists. be your own activist. the mantra today in corporate america is be your own activist. before they show up and do it to us. what that means is that the boards are then demanding short-term focus at the expense of the long-term. what do you think the ceos are doing? there are giving the boards what they want. ceos want to deliver. they don't want to feel the

vulnerability they feel. so what they do, they begin to think short-term and avoid the kinds of long-term transformations that actually created the value in a company like panera. the ceos begin to react to the activism by trying to please activists. and they avoid those transformative bets. here is my point. we can never truly quantify the opportunity cost of the missed innovation that are not even considered in so many public companies today. it's not even a possibility and that's the problem. here is the irony. a capital structure that allows a company to think and act in the long-term interests of stockholders, stakeholders across the board, remains among the most powerful competitive advantages for creating shareholder value creation. i want you to think about the

success of the faang stocks, facebook, amazon, netflix, google, berkshire hathaway, which i mentioned earlier. all of these companies i was suggest you have the success on their ability to think and manage the long-term and many have structural mechanisms that give them the capabilities to do just that. i want to bring it back to the panera story and we will talk about the implications for society. each time i went through the transformation at panera, i laid awake at night word that activists would show up. twice, i got them. in 2008, we had shamrock show up. they said, let me tell you how to run a company. cut your costs here, do that, you don't need all that innovation and transmission. in 2015, another one showed up, luxor. as we were going through all these investments in digital, -- you don't need that. you can outsource it, somebody else can do it, we will buy it. just listen to us.

fortunately, we won in both cases. but, how we won, the difficulty of winning is the challenge. i just want you to appreciate what it felt like. they say it's lonely at the top, you have heard that expression? nothing is lonelier than knowing the thing you spent your life working on could be disrupted by somebody seeking short-term gains, just trying to use it in a short-term program. for me, as somebody who care s deeply about the the people i worked with, about our guests, about the way in which we contributed to the communities we lived in, letting that happen on my watch, letting these guys get a hold of this and take control and rip it up for short-term gains, would've killed me. see, when you love something, the inability to protect it is terrifying. that's the truth. the reality wakes you up at 4:00 in the morning and saps your energy. i want you to understand something else about transformation. successful transformations are

difficult and they require time to determine what matters and time to test. and evolve. we were just talking about this. nothing is proven until done. but activist investors don't have the patience to wait for that proof. they don't need to. the truth is we at panera were blessed, because we have the time to make those long-term transformations. i worried if i wasn't here and i'm 65 and i have 70% of the stock, and i have this reputation and i have the credibility, what happens in the future? would panera have the ability to drive the kind of success and drive long-term transformation? i worried about it deeply. my answer to that question was simple, i chose to take the company private at the height of its success in 2017, with an evergreen european investment. why did i do that? why? because it was a great deal. it was the biggest u.s.

restaurant deal ever done, and among the highest multiples, and it was a very good deal for our shareholders. there were other reasons. i was driven by was the desire to protect our competitive advantage and our ability to make these long-term transformative commitments. i wanted to also insulate our company and our stakeholders from the predatory behavior of short-term financial engineering. i ultimately came to this conclusion -- when i came of age, long-term money was going public. today, long-term money is in the private marketplace. that was very clear to me, that was the place you could do your best work in delivering for guests, for team members, and ultimately, for your shareholders. here is my broader point today, i believe the pervasive short-termism found in our capital markets is bad for our

economy and bad for our country. i'm not the only one who is seeing that. top business leaders are concerned. warren buffett and jamie dimon recently wrote the financial markets have become too focused on the short-term. companies frequently hold back on technology spending. they hold back on hiring and hold back on research and development to meet quarterly earnings targets. others are speaking and pundits are telling us our short-termism is making our markets less attractive. andrew ross sorkin of the new york times recently wrote it's no secret the public markets, despite the heights they have reached, are fundamentally broken. he went on to write no chief executive wants to live in the glare of the public spotlight and deal with pesky investors who hold stock in time frames of days or months, not years and decades. here's the results. look at the data. look at the facts, the number of public companies has shrunk by

half in the past two decades. our public markets are not working. leading academics are also urging that there are serious public policy consequences if we don't fix our markets. some of you know clay christensen. he is a friend and author of "the innovator's dilemma" and one of the great thinkers in this country on innovation. recently he wrote -- financial markets and companies themselves use of assessment tools, basically simple roi, that make innovation to eliminate jobs more attractive than those who create jobs. what is he saying? we live in a world where there is such short-term pressure , the only way to eliminate that pressure is to cut costs. any other innovation will take too long and you will not have the chance to get through it. he gets to the heart of the problem. this is the short term focus of today's public markets. they pose a powerful challenge to the ability of american companies to innovate, compete, and ultimately generate real gdp growth.

real gdp growth only happens when you have innovation, when your productivity increases. without that, you don't get gdp growth. the leaders of american finance recognize this. they recognize structural reform is necessary. some of you may know the name larry fink, blackrock, one of the largest money managers in the country. we are talking about trillions. he wrote recently, the time has come for a new model of shareholder engagement. we need to focus on benefiting shareholders instead of proxy fights. even our president donald trump has offered his answer to the problem. he said we are not thinking far enough out. he said, so we, the administration, are looking at dropping quarterly guidance very, very seriously. we are looking at twice a year instead of four times a year. structural remedies are necessary, and they are available. we could introduce differential voting rights based on how long

somebody holds stock. the fact that you have held stock for 10 seconds should not give you the same rights as somebody who has been invested in that company for years, if not decades. and this is presently done, it is presently done in europe. we can also adjust the tax rates based on holding periods. and we do today. short-term capital gains on long-term capital gains. it's there to be had if we choose that in our public policy objectives. then there is the issue of guidance. guidance is what we as public company ceos are constantly giving out, and we are managing that guidance, managing that relationship with the street. a moratorium on guidance will change the discussion from whether a company meets expectations, as if that is the means to measuring a company, to a discussion of how is the company performing against its key metrics? which is actually much more substantial and much more how we would think about a company while it transforms.

finally, i want to talk about compensation. compensation needs to be based on long-term performance around key metrics, not simply stock performance. stock has many other factors that drive it. when you focus folks on the stock, they are focused on anything they can do to get the stock to move, as opposed to what drives the underlying success of the company. here's the point i want to leave you with today. as journalists, as business folks, and as citizens, we must understand the consequence of the pervasive short-termism that has seeped into our capital markets. we must push for structural changes and we must continue to protect long-term thinking if we expect american companies to innovate. if we expect to be a to drive continued economic competitiveness, and most importantly, we must evolve if we expect to ultimately drive gdp growth.

my point, if we don't, the long-term health of american companies and the vitality of the economy is at risk. thank you. [applause] host: we will take questions from the audience. i also got a lot of questions via emails the last couple of days. mr. shaich: we will not take bacon, turkey, bravo questions, right? [laughter] host: you can ask anything. i will start. you mentioned a few things, particularly the idea that companies, company leaders' number 1 obligation is to the shareholder, at least structurally, the way the markets are now. how do you fix that? who should they be obligated to? should they be obligated to employees, the community, their suppliers, how do you change it?

mr. shaich: let's talk about why it is, and we can talk about how to change it. it wasn't always this way. corporations are chartered by the state, and when you think about it, the shareholders in a public company are not owners like you and i, if we were to own a house. they have no legal liability. their names are not on the door. the have almost complete liquidity and can get in and out. they have a relatively diminished relationship with it. in many ways, the structure of it is much more like renting an apartment than it is like owning that apartment. we give undue power to them in the context of that. until the last 30 years, that was not the way we thought about it. we had a responsibility as is as -- business leaders in a much broader context to the community, to the society, to the country, to our employees, to our communities. i think that the way to fix that, what i am trying to do, is just give voice to it. host: was there a regulatory change or just an attitude change? mr. shaich: it was an attitude change that began in the 70's.

as i said, agency theory came out and became prevalent in business schools. there was a mantra of maximizing shareholder value and it became more and more short-term. i produced extraordinary value. we sold our business for $7.5 billion. but that didn't happen overnight. i am an overnight success in 36 years. through four transformations. the reality is, that is how you create value the old-fashioned way. but we have built a culture that is talking about something very different. i speak about this in many different places. what amazes me is so many people get this, they just don't know how to fix it. i think the most powerful thing folks like i am trying to do, others you heard that i quoted, are trying to give voice to it. we are trying to ask the

question, is this a system that serves us? i think if you ask yourself that seriously, you would really answer it with a question mark. and you will begin to say, how do i be a part of the solution, not just accept the problem? host: you mentioned other business leaders who seem to be on the same page with you but i don't get the sense broadly the market and the investment community is. or are you hearing more than i am? mr. shaich: i am hearing it more than you are. i'm living this. when i speak to folks in the activist community -- i did one conference with jim cramer six months ago -- what always amazes me is how much support i get from folks that are actually spending their working hours working on this. i watch faces over here. you guys in the financial community, yes? i find anybody who is in it gets it. the problem is we don't

understand how to fix it, and we can't get above ourselves to really fix it. our system and we created it. and by the way, it is not wall street, it is us. everybody wants to drive these returns so intensely. your 401(k)s, which put pressures on the money managers, and put pressure on the public companies, which drive this whole behavior cycle. i simply need to say my view of it is, we have to ask ourselves, is this serving us? it is our society. it is our economy. host: it sounds like you are trying to change minds and you have to change laws. mr. shaich: you change the mind first, and then comes the laws and you also change practices. but enough people have to say this makes sense and you begin to see the kinds of of structural change. there is a momentum out there. there is a number of people. i'm trying to give witness to my own personal experiences, but there is a number of people that control vast resources that get this. there is a lot of folks in the

regulatory community that understand this. i mean, you have trump speaking to it. that tells you there's something afoot. it really tells you that there is real challenges here and there is real possibility. host: how much has the emergence of 24-hour business news media contributed to this? cnbc, fox business, i used to work at bloomberg, do they emphasize short-term gains too much? mr. shaich: yes. [laughter] mr. shaich: this is one place where i'm not blaming the media. i also think these issues are not dissimilar to what we see in our body politic where we have this environment where we are competing with the chinese with 20-year plans and we cannot agree on a budget for 20 months.

part of that is driven by -- i think we all recognize it you , have a media that is now speaking -- cable news -- that is now speaking to various niches of the consumer public and repeating back they want to hear. i think some of that occurs with the cable business press. i love my friends at cnbc but a whole bunch of it is, what happened to the stock yesterday, what is going to happen tomorrow? that focus on simply the trade as opposed to the growth and the inherent strength of company gets lost often in that kind of discussion. host: i have a bunch of questions here about executive compensation. i know you touched on it. mr. shaich: i am in favor of it. [laughter] host: people are asking about the income gap between the highest-paid ceos versus the workers, whether that is damaging. also, how much of the executive compensation should be tied to

stock price? you mentioned performance. mr. shaich: let's take each of them. i think we all know that over the last 10-15 years, certainly since the great recession, it's guys like me, guys on wall street, that have benefited. it's actually main street that hasn't. and that is part of what we see playing out in our national politics. the folks up in pennsylvania and ohio who got the plant closed, because you have some activists driving tougher and tougher performance, let's cut that factory, move those jobs, let's do something. let's drive that stock price in the short term and i will benefit from it. that's the thinking. that has a price. a very real price. i do think that there are implications for this kind of

pervasive short-termism in our public markets. it has an impact on the country and ultimately has a political price and leads to what i think is unfortunately, the benefits are not moving equally across the society. another question you asked was how i felt about compensation. i think that when you have ceos making 1000 times what the average worker is making, we really need to ask some questions. you may think that that ceo is worth it, but it sends the wrong

message. it is the wrong way to build our country. i don't know that i have clear answers, but i do know that we're in this together, and if we are only in the game of seeing somebody else as a way to accomplish my financial needs and not understand that there is a long-term implication to it, i think we are setting ourselves up for trouble. host: when you talks about the auto company closing the factory, i recently read that tesla has the best-selling luxury cars in the country, yet the narrative in the news based on investor expectation is that elon musk is a failure. is that an issue of short-termism? mr. shaich: i think that elon musk is a public relations calamity. [laughter] mr. shaich: i don't care what you are doing, you know, discipline, being able to play by the rules and keep your mouth

shut, and dealing with real facts, matters. so i think tesla is a whole different situation, and it is a question of leadership. his ability to bear the burden and responsibility of leading an enterprise. host: we had a question over here? >> i am the chairman of the board of the wharton d.c. innovation summit. one of the words you used most frequently doing your excellent talk was innovation. what do you see as the public and private policies and actions to drive innovation, whether in the food industry, telecommunications, health care, transport or other fields? mr. shaich: you do a google search of the word innovation today, i would hazard a guess that innovation is mentioned 10

times more than it was 5 years ago. it is hot. every young person wants to be in innovation. it's where the excitement is. it is the catchall phrase. having said that, i am not sure our large enterprises are actually set up, and absolutely i'm convinced that the financial pressures inhibit it. that is what i'm talking about here. when you put innovation and innovation leadership up against short-term financial pressure, financial pressure wins every short-term time. i will share with you a little story. i was speaking at a conference on innovation several years ago. i actually heard one of the leading speakers on innovation. he was speaking -- i will not

tell you who it is, or who was in the room, but i will tell you that there were 10 of the fortune 50 ceos in the room. this other gentleman said, lookit, you all live in fear of the guy coming up with the next innovation in a garage that will disrupt your business. but what you don't understand is that you actually have the thing they are more afraid of, and is more powerful. you have the distribution. you have the scale, you have the economics, you have the capital. the problem is, large institutions don't have the space and time given where we operate within these public markets to actually make that investment ahead of the curve, so they have to wait until the next apple is born in that garage and then they try to react, and it is often too late. we have this system that is so tightly wound around short-term performance that that there

isn't enough slack to actually, in larger enterprises, deliver for the long-term. >> my name is julie, i write about the restaurant industry for a trade publication. this morning, panera announced a new ceo. in the past few weeks, there has been new ceos at restaurant companies in general. would you be able to comment on how new leadership can help a restaurant company with their long-term growth strategy? mr. shaich: yes. i just saw that coming over here. i am going to take a contrary view. i argue that the restaurant industry, for example, seems very simple. make some food. there are few industries that are tougher. it's easy to think about it but it's hard to deliver. in 2500 distributive units around the country, where you have to basically make the food,

bring the people in every day, it is a difficult business. i believe deeply that the best way to approach that is with management that's thinking long-term. the kinds of things that really add value are really these kind of transformations we made. and companies like starbucks have made, companies like chick-fil-a have made. what you typically see in those organizations -- long-term leadership. because it takes time to understand, takes time to make the commitment, make the bet and it takes time to play it out. so i think the rapid turnover of ceos, and i am not commenting on the specific panera case, but speaking in general, i think the rapid turnover of ceos is usually a marker for a company that is not going to be driving

the kind of innovation that is going to be lasting. >> i wanted to address two things that you mentioned. you talked about requiring laws and regulations to fix the market. what would you tell folks who would say, hey, the market is self-correcting, leave it alone, regulations only add to the cost? secondly, you talked about wage disparities. i don't know if all ceos agree with what you said. for you, is that a matter of basic humanity or patriotism? why do you think that even needs to be addressed in a capitalist system? mr. shaich: let's take the last question first. that is the tougher of the two. i think this wage disparity, there are moral questions when you have people that are not able to live on a living wage,

frankly. everyone of us has to ask the question for themselves but i do think that's true. i don't think we want people that are working that are below the poverty line. personal view. having said that, i would go further and say, when you have this kind of wage disparity, it is bad for anyone who believes in the country. it is bad for anybody who believes that -- it is bad, because it pulls us apart, because you end up having folks that are so disconnected and so outside the mainstream that we will create social conditions that will rip us apart. i think, as a guy who has done very well, and i am not trying to be a hypocrite here, i personally believe we do better when we are in this together, as a society.

host: do you know what the ratio was at panera when you were ceo? mr. shaich: i don't. i generally came out among the top ceos in the relationship of performance to what i was paid. frankly, i was a founder and i had founder's stock. i didn't really care about my short-term compensation. what i cared about were the company went. between us, what i really cared about was my responsibility to this institution. it's a much broader question but i think responsibility to each other and responsibility to the institutions we work for is not spoken about enough. that is what we want from our leaders, not simply optimizing for their own short-term benefits. these are much deeper questions

about what kind of society works best. >> my name is carol, i spent 40 years in journalism mostly in food and agriculture. must companies address some of the existential threats facing humanity, such as climate change, or systemic threats that affect food and agriculture such as the national obesity epidemic, and how do you look at issues such as those, and the corporate responsibility toward them? mr. shaich: i think it is a profound responsibility of leadership, ceos, food companies, to frankly be part of the solution, not part of the problem.

one of the great joys of panera was our ability to do that. we were the first one or two companies to bring in antibiotic chicken. when the whole world was posting caloric information we said why would we not put it on the menu? if we are embarrassed about what is on the menu, maybe we should change the menu and not try to hide it. in 2014 and 2015, we made the decision we wanted to remove these artificial colors and flavors and preservatives and sweeteners and we spent two years doing it. i made that pronouncement internally before we knew that him and we could do it. because i knew that if we put a line in the sand, we would get there. and we have continued down the road. all i would say is, i think it is good business to take care of your guests. i think part of panera's success, is that we were trusted. we are not perfect, we got lots

of issues. i think we continuously have to be asking ourselves -- is our only responsibility as corporate leaders to maximize our personal compensation or is the responsibility in that leadership role to our team members to have a sustaining enterprise, to our communities, making a difference, or to our guests, making sure that we are adding value to their lives? host: i'm going to jump in briefly. there was a question about regulation. in your experience, is business over-regulated? the president talks about rolling back regulations. and there were two specific ones regarding minimum wage policy and health care policy. i know i'm pushing it altogether. mr. shaich: all the easy ones, huh? [laughter] mr. shaich: let's take one at a

time. you remember which is which and i will come up with the appropriate response. the first one was regulation. is it too much or too little, i think it depends on the issue. some issues are overly regulated, certain work rules are grossly overregulated. the inability to adjust, the inability to hire certain kinds of people, are really out of control. i was talking to someone yesterday who runs a camp in new jersey. he cannot hire teenagers to work at his camp. that is an example of overregulation. on the other hand, there are instances where we have things in our food system that should not be there and they need to be regulated. i think we need to think about regulation not as a universal good or bad but something that has a cost, but also something that has a benefit. host: wage policy or health policy, as a business owner, how much are those difficult? mr. shaich: any time a society

is putting constraints or pressures around you, it makes things difficult. any ceo who tells you, i have too much pressure, that is the job. we are trying to balance all these different constituencies and all these different needs, and the more regulation that is put on, the more constraints and costs, it makes it more difficult. but i think it is the same question. we as a civic society have to make some determinations of what we want. what is ok. and we as business folks have to operate with them. as somebody who has operated for 36 years, 26 of them running a public company, reporting every quarter, up my view is i never worried about that. because everyone of my competitors was getting the same regulation. the challenge to me was not

spending a lot of time worrying about what i couldn't control, but worrying about what i was going to do to get that guest to walk past the other establishments on the street and come to my establishment. that's the way you win when you run a business. and i think that this society, different question, has to make its own determination. what are the constraints we want our enterprises to exist within? >> i am here representing the kogod school of business at american university. mr. shaich: i knew you guys were business students. [laughter] >> yes, we definitely look like it. you mentioned how a short-term mindset is hurting american companies and the ability for innovation and entrepreneurship to develop.

i wanted to ask if you would say there is a country if that is doing does better, and has a longer mindset and the advancement of entrepreneurship and innovation, and if so, what can we learn from them? mr. shaich: that is a great question. i don't have a good answer. i think there are countries. the first one that comes to mind is israel, known as the startup nation. they have built an infrastructure around it. i couldn't tell you what they are doing from a legislative or regulatory perspective, i think, it is as much as anything part of the culture and part of living in an export society. there are regulations coming from other parts of the world that are driving long-term thinking. i think the u.s. has actually exported this kind of short-term thinking. it is a very fair question to be asking. >> the public markets definitely have issues, as you mentioned, but there has also been a huge growth in the private equity industry in this country in the past 10-15 years.

do you think it's in the best interest of our country to have so many of our small, private and midsized companies owned by a highly financially oriented private equity businesses? mr. shaich: you want the long answer or the short one? >> the short one. [laughter] mr. shaich: i will give you the short answer, which is no. our public markets have issues but we have the same issues playing out within private equity. as you may know, private equity is essentially pools of capital, limited partners investing in companies. the problem here is with private equity, if you are really good, you are going to be in their pools of capital for 7-10 years. if you are really good, they will try as quickly as they can to get an inflection point and sell the company, to find a way to capitalize on it. why?

because what drives a private equity firm is essentially raising its next fund. they way that a private equity firm receives most of its remuneration is on its 2% management fees. so what they want to do is get a very high irr and then turn around and be able to market that to raise the next fund. this short-term pressure that plays out in private equity and if you're not so good, you will be out of the fund, and it will run 7-10 years. what i propose, and what i've done, i've taken my own money and we started up what is called an evergreen fund. we have three principles in this evergreen fund and the first one is a commitment to not having terminal points. we have no limited partners, it's all my partners and my money. it's essentially focused on making long-term investments in, and we are quite happy to be in it for 30 or 40 years.

second, it is rooted in something we call founder friendly capital. one of the things you find in an innovation company, increasing the young companies want to in finance, like a corporate lifecycle event, every nine months. but what they don't understand is about often these things come with antidilutive clauses or preferred clauses. what that means is that the stock goes down, only the founders get the new price. that often means there is an shareholders. of terms, i into simple had a company in our office, he had raised $7 million.

-- he had raised $70 million and was facing the prospect of having a lower evaluation round and his equity was going from 15% to 2%. that's the kind of thing you see. our commitment in founder friendly capital says if we will invest with you, we will invest through everything around. we will commit to that but i'll give you the highest valuation that can you consisting u can cannot and as a founder, you don't have to worry about financing again. we have another thing called sherpa management. that is it's harder to build a , national company went to climb out everest. we are helping to guide people as they try to climb mount everest. i think there are better models of how to support his needs -- business innovation. there are better models than private equity that's constituted today. i'm not certain that growing up

and being a public company is the right and best path either. >> we are almost out of time i . -- time. i want to mention some upcoming events. on april 29, a newsmaker event to discuss the status of child and forced labor as it relates to cotton production. on may 2 is night out for austin tice which is a national campaign to help raise awareness and money to help secure the release of a journalist who has been held in syria or seven years. please go to our website, nightoutforaustin.com and that's it for us and find participating restaurants. maybe one by our esteemed guest and go eat some food and support journalism. on 17, we have a book event. and before you leave, our coveted and exclusive national

press club. thank you very much. [applause] [inaudible]

>> here is a look at what is coming up ahead on c-span. newsmakers is next with ralph reed, chair of the faith and freedom coalition. he talks about former vice president joe biden's entry into the presidential race, president trump's chances for reelection and his thoughts on impeachment. former senate majority leader harry reid and former house speaker john boehner offer advice on how to proceed with trouble the administration investigations, following the release of the mueller report. the two also talked about education and the future of work. "q and a," with david brooks, talking about his book "the second mountain,". wednesday, at 10:00 a.m. eastern, attorney general william barr will testify before the senate judiciary committee on the miller report. clockrsday, and on the

a.m. eastern, he will testify before the house judiciary committee, live on c-span3. c-span.org, and listen on the free c-span radio app area -- at. more on that story as a number of duty agencies are reporting that attorney general you are has warned the judiciary committee chair jerrold nadler that he might not appear as scheduled in front of the judiciary committee because of the hearing format. in addition to the five minutes of questioning for each member of the committee, mr. not there proposed an additional round that would allow for each side to question the attorney general for 30 minutes. that round of questioning would allow the committee councils for both parties to question a stir bar. -- mr.orney general barr. the attorney general has roundsd the additional of questioning, but it's possible it could be settled before thursday. mr. nadler said he might issue a subpoena for the attorney general if he refuses to appear pretty

>> tomorrow, former vice president joe biden kicks off his presidential campaign with a rally in pittsburgh. live live on c-span3, on -- online at c-span.org. host: our guest on "c-span's newsmakers" is ralph reed. since the 1980's, he has been working to mobilize christian voters, first through the christian coalition and now through the faith and freedom coalition, which he founded in 2009 and now serves as chairman. the group posts 1.8 million members nationwide. you may not know this, but he has a phd in american history from emory university. mr. reid, thanks for coming back to c-span today.